U.S. corn crop shrinking by the hour

U.S. corn production has shrunk 7 percent versus the government's downgraded estimate a week ago, a Reuters poll found on Tuesday, with a worsening drought likely to cause more damage before the month is out.

As the worst drought since 1956 begins to expand to the northern and western Midwest, areas that had previously been spared, analysts are slashing corn yield estimates by the hour. Some analysts are also starting to cut their forecasts on the number of acres that will be harvested as farmers opt to plough under their fields to claim insurance.

What began the season as a potentially record corn crop as farmers planted the biggest area since 1937, may now be the smallest in at least five years. Soybeans, which enter their key pod-setting phase later then corn, are increasingly at risk. The poll of 13 analysts pegged the average estimated corn yield at 137.2 bushels per acre, down 6 percent from USDA's current forecast of 146 bushels. The USDA dropped its yield estimate by an unprecedented 20 bushels per acre in its report on July 11.

Corn production was pegged at 12.077 billion bushels, the smallest in 5 years, down 6.9 percent from USDA's outlook. "We're losing more yield with the additional stress now in the northern areas which up until now had been pretty good," said Shawn McCambridge, analyst for Jefferies Bache.

Chicago Board of Trade corn futures rose over 40 percent in just six weeks as the drought expanded, eating away at what had been expected to be a record large crop.

Meteorologists are forecasting overall hot and dry weather for the next two weeks in the U.S. Midwest crop belt.

RAIN MAY RESCUE SOYThe poll showed U.S. soybean yield at 39.1 bushels per acre, down 3.6 percent from USDA, and soybean production at 2.931 billion bushels, down 3.9 percent from the USDA's latest forecast.

While most of the corn crop is now seen as largely beyond repair, no matter how much it rains, there may yet be hope for the soybean crop as rains are forecast in the east mid-next week.

However, the drought is spreading into the western and northwestern crop belt, leading to further stress and more crop losses.

"We will likely lower our yields again next week and the following week based on the current weather forecast, which would suggest the August corn and soybean yield will reflect the largest percent deviation from trend since the 1988 crop year," said Terry Reilly, analyst for Citigroup.

CUTTING ACRES TOO Analysts said they not only were lowering yield estimates on an almost hourly basis but were cutting their outlooks for the amount of corn and soybeans to be harvested as farmers turn their crops into fodder or abandon the planted acreage.

"We're taking our harvested acreage for corn down to 88.1 million from the previous 88.6 and also cutting 300,000 harvested soybean acres to 75.0 million," said Don Roose, president and analyst for U.S. Commodities.

The USDA in its July crop report cut its estimate for this year's corn area to be harvested to 88.9 million acres from the previous 89.1 million but increased its planted area to 96.4 million from the previous 95.9 million.

The USDA's current harvested area would be 92.2 percent of the total planted area, an optimistic forecast, according to analysts.

"Our current (corn) yield estimate is 137.2 but we see final potential yields at 129.1. With a preliminary one million acre revision off USDA's harvested acreage we have a crop of 12.053 billion now and a potential down to 11.342 billion," said Rich Nelson, director of research for Allendale Inc.

"It's changing by the hour and by the day. The yield is lower today than it was yesterday. Yesterday's estimate was lower than Friday and we have to drop the harvested acreage too" said Charlie Sernatinger, analyst for ABN Amro.